-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MzTFqZ9EWdudEcHB1N+X0YaP9MGXqYeklTzm6MlwAYRzT9Cm83xTwKmk9uEgR+nq /qyBxtazF9ccYCjErhvFTQ== 0000740112-97-000006.txt : 19970815 0000740112-97-000006.hdr.sgml : 19970815 ACCESSION NUMBER: 0000740112-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONCORD EFS INC CENTRAL INDEX KEY: 0000740112 STANDARD INDUSTRIAL CLASSIFICATION: FUNCTIONS RELATED TO DEPOSITORY BANKING, NEC [6099] IRS NUMBER: 042462252 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13848 FILM NUMBER: 97663760 BUSINESS ADDRESS: STREET 1: 2525 HORIZON LAKE DR STE 120 CITY: MEMPHIS STATE: TN ZIP: 38133 BUSINESS PHONE: 9013718000 MAIL ADDRESS: STREET 1: 2525 HORIZON LAKE DRIVE STREET 2: SUITE 120 CITY: MEMPHIS STATE: TN ZIP: 38133 FORMER COMPANY: FORMER CONFORMED NAME: CONCORD COMPUTING CORP DATE OF NAME CHANGE: 19920515 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended Commission file number 0-13848 June 30, 1997 ___________________________ CONCORD EFS, INC. (Exact name of registrant as specified in its charter) Delaware 04-2462252 _______________________________ _____________________ (State or other jurisdiction of (I.R.S. Employer Incorporation of Organization) Identification Number) 2525 Horizon Lake Drive, Suite 120, Memphis, Tennessee 38133 (Address of Principal Executive Offices) (901) 371-8000 (Registrant's telephone number, including area code) _________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] No[ ] The number of shares of the registrant's Common Stock, $.33 1/3 par value, as of June 30, 1997 was 61,251,767. CONCORD EFS, INC. AND SUBSIDIARIES INDEX Page No. -------- PART 1- Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 1 Condensed Consolidated Statements of Income for the Three Months and Six Months ended June 30, 1997 and June 30, 1996 2 Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 1997 and June 30, 1996 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 PART II - Other Information Item 6. Exhibits and Reports on Form 8-K 7 Signatures 8 Exhibit 11 - Computation of Earnings Per Share CONCORD EFS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30 December 31 1997 1996 -------- ----------- (In thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $104,691 $ 96,164 Securities available-for-sale 94,979 63,345 Accounts receivable, net 47,362 38,248 Inventories 6,027 4,353 Prepaid expenses and other 5,762 3,577 -------- -------- TOTAL CURRENT ASSETS 258,821 205,687 SECURITIES HELD-TO-MATURITY 54,744 56,714 OTHER ASSETS 8,249 3,375 PROPERTY AND EQUIPMENT 79,224 73,819 Less accumulated depreciation and amortization 51,385 46,782 -------- -------- 27,839 27,037 -------- -------- TOTAL ASSETS $349,653 $292,813 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and other liabilities $ 79,204 $ 71,814 Accrued liabilities 11,700 2,849 Current maturities of long-term debt 431 418 -------- -------- TOTAL CURRENT LIABILITIES 91,335 75,081 LONG TERM DEBT, LESS CURRENT MATURITIES 18,342 561 DEFERRED INCOME TAXES 2,212 2,023 STOCKHOLDERS' EQUITY: Common Stock-par value $.33 1/3 per share; authorized 100,000,000 shares, issued 61,251,767 shares at June 30, 1997 and 60,817,424 shares at December 31, 1996 20,417 20,272 Other stockholders' equity 217,347 194,876 -------- -------- TOTAL STOCKHOLDERS' EQUITY 237,764 215,148 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $349,653 $292,813 ======== ======== See Notes to Condensed Consolidated Financial Statements - Unaudited. -1- CONCORD EFS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Six Months Ended Ended June 30 June 30 ------------------ ------------------ 1997 1996 1997 1996 ------- ------- ------- ------- (In thousands, except earnings per share) Revenues $56,759 $40,857 $103,804 $74,752 Cost of operations 41,536 28,503 76,487 53,037 Selling, general and administrative expenses 1,879 3,224 3,897 5,958 ------- ------- ------- ------- OPERATING INCOME 13,344 9,130 23,420 15,757 Other income (expense): Interest income 2,455 657 4,728 1,315 Interest expense (99) (25) (115) (53) ------- -------- ------- ------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 15,700 9,762 28,033 17,019 Income taxes 5,570 3,449 9,970 6,089 ------- ------- ------- ------- INCOME BEFORE MINORITY INTEREST 10,130 6,313 18,063 10,930 Minority interest (42) ------- ------- ------- ------- NET INCOME $10,130 $ 6,271 $18,063 $10,930 ======= ======= ======= ======= Per share data: Weighted average common and common equivalent shares outstanding 62,868 59,171 62,858 58,988 ====== ====== ====== ====== Earnings per share $0.16 $0.11 $0.29 $0.19 ====== ====== ====== ====== See Notes to Condensed Consolidated Financial Statements - Unaudited -2- CONCORD EFS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30 --------------------- 1997 1996 -------- ------- (In thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES $28,582 $10,421 INVESTING ACTIVITIES: Acquisition of property and equipment (5,405) (8,714) Purchases of securities available-for-sale (58,643) (6,463) Purchases of securities held-to-maturity (8,915) (1,475) Sale of securities available-for-sale 11,279 Maturities of securities available-for-sale 15,949 Maturities of securities held-to-maturity 10,884 Purchased merchant contracts (5,276) 198 -------- ------- NET CASH USED IN INVESTING ACTIVITIES (40,127) (16,454) FINANCING ACTIVITIES: Proceeds from notes payable 18,000 Proceeds from exercise of stock options 2,278 1,624 Payments on notes payable (206) (193) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 20,072 1,431 -------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,527 (4,602) Cash and cash equivalents at beginning of period 96,164 36,573 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $104,691 $ 31,971 ======== ======== For purposes of these statements, the Company considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents. See Notes to Condensed Consolidated Financial Statements - Unaudited. -3- CONCORD EFS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1997 Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant's annual report on Form 10-K for the year ended December 31, 1996. The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Securities Net unrealized loss on securities available-for-sale: June 30 December 31 1997 1996 ---------- ----------- Decrease in securities available-for-sale $538,073 $757,606 Increase in deferred tax assets 184,000 261,000 Decrease in equity 354,073 496,606 Stockholders' Matters and Earnings Per Share In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of statement 128 on the calculation of primary earnings per share and fully diluted earnings per share for the second quarter and six months ended June 30, 1997, and June 30, 1996 is not expected to be material. -4- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Form 10-Q may contain or incorporate by reference statements which may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Prospective investors are cautioned that any such statements are not guarantees for future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include significant fluctuations in interest rates, inflation, economic recession, significant changes in the federal and state legal and regulatory environment, and competition in the Company's markets. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future results over time. RESULTS OF OPERATIONS Quarter Ended June 30, 1997 Compared to Quarter Ended June 30, 1996: Revenues increased 39% in the second quarter of 1997 when compared to the same quarter of the prior year. Transaction processing revenue from Card Services (76% of total revenues) increased 37% as new merchants were added and usage at existing merchants increased. Trucking Services (20% of total revenues) increased 87%, driven by surcharge revenue at cash dispensing machines (ATM), ATM transaction fees, ATM processing fees and additional trucking companies using the Company's fuel and cash advance services. Check, EFT and Terminal Services (4% of total revenues) offset these increases, declining 29%. The decrease was primarily attributable to competitive repricing in Check Services and lower product sales in Terminal Services. Net income as a percentage of revenue increased in the second quarter of 1997 to 17.8% from 15.3% in the same quarter of the prior year. Three main factors to the percentage change were: increased operating costs primarily from interchange related expenses, offset by reduced selling, general and administrative expenses and increased interest income. The following summarizes the decrease in selling, general and administrative costs. Historically, the Company has generated sales through senior management, commissioned telemarketing activities and outside sales representatives; however, in 1996 the Company reorganized its marketing activities to meet future growth objectives by increasing direct marketing staff, downsizing the telemarketing staff and entering into agreements with independent sales organizations to purchase individual merchant contracts and merchant portfolios. As the cost of merchant contracts and portfolio acquisitions are capitalized and amortized over the average life of the contract, current second quarter 1997 selling, general and administrative expenses decreased by approximately $2.5 million when compared to the prior year. Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996: Revenues increased 39% for the six months ended June 30, 1997 when compared to the same period of the prior year. Transaction processing revenue from -5- RESULTS OF OPERATIONS (continued) Card Services (76% of total revenues) increased 37% as new merchants were added and usage at existing merchants increased. Trucking Services (19% of total revenues) increased 85%, driven by surcharge revenue at cash dispensing machines (ATM), ATM transaction fees, ATM processing fees and additional trucking companies using the Company's fuel and cash advance services. Check, EFT and Terminal Services (5% of total revenues) offset these increases, declining 24%. The decrease was primarily attributable to competitive repricing in Check Services and lower product sales in Terminal Services. Net income as a percentage of revenue increased for the six months ended June 30, 1997 to 17.4% from 14.6%. The percentage changes for the six months are comparable to the three month period above and the discussion of changes for the three month period is consistent with the six month period. LIQUIDITY AND CAPITAL RESOURCES The Company generated $28.6 million from operating activities for the six months ended June 30, 1997. Investment securities purchases were $29.4 million, net of sales and maturities. Notes payable of $18.0 milion were utilized to fund a portion of the security purchases. $5.4 million was spent capital additions, primarily new computer equipment. The Company spent $5.3 million to purchase individual merchant contracts. Significant changes in cash, accounts receivable and accounts payable result from the day of the week the period end falls combined with increases in settlement volume from one period to the next. The Company has unused unsecured lines of credit of $10 million with financial institutions. The Company also holds securities with an approximate market value of $124 million that are available for operating needs or as collateral to obtain short term financing if needed. With little debt, adequate credit and strong cash generation, the Company is in sound financial condition and expects to fund continued growth from currently available resources. EFS National Bank, a wholly-owned subsidiary of the Company, exceeds required regulatory capital requirements. The Company's working capital ratio was approximately 2.8 to 1 at June 30, 1997. -6- PART II OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K. (a) Exhibits 11 - Computation of Earnings Per Share. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the second quarter. -7- Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONCORD EFS, INC. Date: August 14, 1997 By: /s/ Dan M. Palmer --------------------------- Dan M. Palmer Chief Executive Officer Date: August 14, 1997 By: /s/ Thomas J. Dowling --------------------------- Thomas J. Dowling Vice President & Controller -8- EXHIBIT 11 CONCORD EFS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE Three Months Six Months Ended Ended June 30 June 30 ---------------- ---------------- 1997 1996 1997 1996 ------ ------- ------ ------- (In thousands, except earnings per share) For primary earnings per share: Net income $10,130 $ 6,271 $18,063 $10,930 ======= ======= ======= ======= Weighted average of common shares outstanding Weighted average common stock 61,110 56,600 60,966 56,484 equivalent shares for stock options by treasury stock method 1,758 2,571 1,892 2,504 ------- ------- ------- ------- Weighted average common and common equivalent shares 62,868 59,171 62,858 58,988 ======= ======= ======= ======= Per share amount $0.16 $0.11 $0.29 $0.19 ======= ====== ======= ====== For fully diluted earnings per share: Net income $10,130 $ 6,271 $18,063 $10,930 ======= ======= ======= ======= Weighted average common and common equivalent shares for primary earnings per share 62,868 59,171 62,858 58,988 Add shares representing additional shares for stock options based on period-end market price 193 120 176 81 ------- ------- ------- ------- Weighted average common and common equivalent shares-fully diluted basis 63,061 59,291 63,034 59,069 ======= ======= ======= ======= Per share amount $0.16 $0.11 $0.29 $0.19 ======= ======= ======= ======= EX-27 2
5 1000 3-MOS 6-MOS DEC-31-1997 DEC-31-1997 JUN-30-1997 JUN-30-1997 104691 104691 149723 149723 48610 48610 1248 1248 6027 6027 258821 258821 79224 79224 51385 51385 349653 349653 91335 91335 0 0 0 0 0 0 20417 20417 217347 217347 349653 349653 56759 103804 56759 103804 41536 76487 43415 80384 0 0 315 615 99 115 15700 28033 5570 9970 10130 18063 0 0 0 0 0 0 10130 18063 .16 .29 .16 .29
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